Tyler Inc.'s most recent annual dividend was $3.55 a share. The firm has been growing at...
Tyler Inc.'s most recent annual dividend was $3.55 a share. The firm has been growing at a consistent 4% rate for several years, but analysts generally believe better times are ahead and future growth will be in the neighborhood of 5%. The stock is currently selling for $80. Stocks similar to Tyler earn returns ranging from 8% to 10%. Calculate value for a share of Tyler at interest rate of 8%. Round the answer to two decimal places. $ Calculate value for a share of Tyler at interest rate of 9%. Round the answer to two decimal places. $ Calculate value for a share of Tyler at interest rate of 10%. Round the answer to two decimal places. $ Do you think Tyler is a good investment for the long run - that is, for someone planning to hold onto it for 10 or more years? Yes Do you think it's a good investment for the short term? That is, should you buy it with the expectation of selling in a relatively short period, say a year or less? No Repeat the calculations in part (a) assuming that instead of rising, Tyler's growth rate remains at 4% or declines to 3%. Round your answers to two decimal places. Growth rate of 4%, interest rate of 8% $ Growth rate of 4%, interest rate of 9% $ Growth rate of 4%, interest rate of 10% $ Growth rate of 3%, interest rate of 8% $ Growth rate of 3%, interest rate of 9% $ Growth rate of 3%, interest rate of 10% $
Homework Answers
a). Value per share = Next year's dividend/(required return - growth rate) where next year's dividend = latest dividend*(1+growth rate)
b). The current stock price of 80 is between 93.19 and 74.55 so depending upon the required return by the investors, it can be a good investment.
c). It is difficult to predict if it is a good investment for the short term because one does not know how long, it will take to realize its intrinsic value.
d).
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